With the Taliban’s rule disintegrating across Afghanistan, the United States must now confront the “principal agent” problem that has been in the background since the war on terrorism began. Principal agents rely on proxies to carry out their plans. Getting someone else to do your dirty work always causes trouble. You cannot be sure that proxies will do what you tell them to do, and you may end up with your own hands as dirty as theirs.
If the US Federal Reserve raises its policy interest rate by as much as is necessary to rein in inflation, it will most likely further depress the market value of the long-duration securities parked on many banks' balance sheets. So be it.
thinks central banks can achieve both, despite the occurrence of a liquidity crisis amid high inflation.
Although Silicon Valley Bank was not deemed to be systemically important, its insolvency forced the US Federal Reserve to head off systemic contagion and exposed the inadequacy of the FDIC’s partial deposit insurance regime. The financial-stability framework adopted after the 2008 crisis obviously needs another overhaul.
considers what the bank’s failure should mean for the current financial-stability framework.